M&S makes venture capital investment in digital push

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Marks and Spencer has made one of the first venture capital investments in its 137-year history, committing more than £20m to a technology fund as the retailer attempts to accelerate its transition to a digital-first business.

The FTSE 250 group will be a cornerstone investor in a new fund managed by True, which manages private equity-style vehicles and operates a network to bring together consumer businesses and technology start-ups. M&S has worked with True since 2018 but this is the first time it has made a significant financial commitment.

Eoin Tonge, chief financial officer of M&S, said the partnership “had already led to some fruitful commercial engagements” such as bringing childrenswear brand Frugi on to the retailer’s website. “But we’re starting to think about the next growth sectors for us, things that could be relevant in five years or more,” he said

Tonge added that while the company’s main objective was to secure early access to new technology and thinking, it also expected to make a financial return on its commitment.

True takes equity stakes of up to £50m in digital-first businesses that are capitalising on shifts in consumer behaviour, such as the growth of ecommerce or the rising awareness of sustainability.

It has about £600m under management, with investments including workplace wellness app Unmind, staff rostering system Rotaready and online furniture retailer Cotswold. It aims to raise a total of £275m for the latest fund, its third, with M&S acting as the lead investor in the initial round.

M&S, which traces its origins back to a Leeds market stall in 1884, has not always had an easy relationship with technology. Its automated warehouse in Leicestershire, built at considerable expense to fulfil online orders, took years to reach industry-standard levels of reliability. The retailer’s customer website had until recently a reputation for being slow and clunky while many of its internal IT systems still ran on old-fashioned mainframe computers.

But since the installation of a new management team led by chair Archie Norman, the business has invested heavily in technology and has used the pandemic to accelerate that process.

“The culture has changed since 2018,” said Tonge. “Some of that was pure necessity — the world has changed and you cannot survive with a store-only mentality.”

Matt Truman, co-founder of True, said Norman had been pivotal. “I’ve been involved with M&S since Archie became chair and he’s been the key driving force in that cultural change. He’s always been very clear about the ‘buy, build or partner’ approach.”

True works with other retailers, including Primark, John Lewis and Wm Morrison in the UK and Walgreens Boots Alliance and TJX in the US.

Lisa Hooker, head of retail, consumer and leisure at consultancy PwC, said the increased use of partnerships by retailers reflected a recognition that technology was not their core competence.

“Why try and do all this yourself when you can work with people who are the best at what they do?” she said. “Initiatives like this give companies access to up-and-coming brands, knowledge and interesting technology.”